Convergys' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Convergys (CVG)

Q4 2011 Earnings Call

February 07, 2012 10:00 am ET

Executives

David Stein - Vice President of Investor Relations

Jeffrey H. Fox - Chief Executive Officer, President, Non Independent Director and Member of Executive Committee

Earl C. Shanks - Chief Financial Officer

Analysts

Eric J. Boyer - Wells Fargo Securities, LLC, Research Division

Kevin D. McVeigh - Macquarie Research

Matthew J. McCormack - BGB Securities, Inc., Research Division

Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Vincent Lin - Goldman Sachs Group Inc., Research Division

Ashwin Shirvaikar - Citigroup Inc, Research Division

David J. Koning - Robert W. Baird & Co. Incorporated, Research Division

Giridhar Krishnan - Crédit Suisse AG, Research Division

Robert Benjamin Kirkpatrick - Cardinal Capital Management, L.L.C.

Presentation

Operator

Compare to:
Previous Statements by CVG
» Convergys' CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Convergys' CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Convergys' CEO Discusses Q1 2011 Results - Earnings Call Transcript

Welcome to Convergys Fourth Quarter 2011 Earnings Teleconference. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I'd like to go ahead and turn the call over to your host for today to Mr. David Stein, Vice President of Investor Relations. Sir, you may begin.

David Stein

Thank you, José, and good morning. Welcome to the Convergys Fourth Quarter 2011 Earnings Call and Webcast Presentation. This call is the property of Convergys. Please note that slides accompanying today's prepared remarks are available on the Convergys Investor Relations website under Events and Webcasts.

Today's call contains forward-looking statements that address our expected future performance and that, by their nature, address matters that are uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements as a result of new information or future events or developments. Please refer to today's earnings release and our most recent filings with the SEC for additional information regarding uncertainties that could adversely or positively affect our future financial results. This includes the risk factors provided in our 10-K for the year ended December 31, 2010.

Also during the call, we'll discuss non-GAAP financial measures, including free cash flow, adjusted net income from continuing operations and adjusted EBITDA. A reconciliation of these non-GAAP measures is available in the news release and on the Convergys IR website.

With me on the call today are Jeff Fox, our President and Chief Executive Officer; and Earl Shanks, our Chief Financial Officer. Jeff will provide a summary of our operating results. Earl will cover our financial performance and business outlook, then we'll open the call for your questions.

Now I'll turn the call over to Jeff.

Jeffrey H. Fox

Good morning, everyone. I'll begin with a review of overall company performance and discuss the progress we're making executing our plans, then I'll provide an update on each of our segments.

Both of our businesses continued to show operational progress in the quarter, and overall, we delivered solid revenue growth and profit improvement. Our total revenue of $589 million represents an increase of 3% compared to last year. To put our top line growth in perspective, we increased revenue by $16 million despite the reduction in transition services revenue related to the sale of our Human Resources Management business.

Operating income of $50 million was up 5% compared with last year on an adjusted basis, and EBITDA increased 7% to $76 million compared with adjusted EBITDA of $71 million last year. GAAP EPS from continuing operations was $0.40. Adjusted EPS from continuing operations would have been $0.28 in the quarter with a normalized tax rate, which represents an 8% increase from $0.26 per share last year.

Our operations also produced solid free cash flow of $30 million in the fourth quarter. Based on our confidence in the business, we repurchased $58 million of stock during the fourth quarter and ended the year with $422 million of cash on the balance sheet. We still have authorization to repurchase $163 million of stock, which represents about 10% of our shares outstanding at today's stock price.

Overall, I'm encouraged by our execution across each business this quarter and for the full year. In 2011, our operating results and cash position improved significantly, creating flexibility for us to invest in the business and enhance shareholder value. We are continuing to simplify each of our businesses strategically and operationally, and we are taking actions that allow us to capture our share of industry growth by investing in what matters to our clients. As we enter 2012, we expect to see continuing revenue growth and earnings improvement for the full year.

Now let's review the progress we have made in our Customer Management business, which had another excellent quarter of revenue growth and margin improvement. Overall, industry trends in the fourth quarter were consistent with our experience over the last several quarters. Let me take a moment to tell you about what we are seeing with clients in the marketplace in terms of call volumes, vendor consolidation, offshore demand and the pricing environment.

Call volume for live agent services remains strong, even as consumers are adopting alternate interaction channels to address their simple transactions. As agent-assisted transactions increase in complexity, the average handle time for consumer calls increases. This trend plays to our strength as a provider of high-quality operational services through our global and scalable operating model. We continue to see our clients consolidating their contact center vendors, and we believe our investment in delivering quality and alignment with our client's business goals through focused account management positions us to see this as a net positive for our business.

Read the rest of this transcript for free on seekingalpha.com